DEAR BRUCE: Can you advise me on how you think our money would best be spent and invested? My husband and I (54 and 46, respectively) are healthy and employed. We own our home, which was built in 2004, and our vehicles, which are each a year old. Our yearly income runs around $90,000. We both love to hear the word “overtime” and live conservatively.
We will be buying a new boat (our reward to ourselves) and will spend between $15,000 and $20,000. Should we use our home equity loan at 3.25 percent and use that little bit of interest for next year’s taxes or pay it off?
Should we contribute now to both my 401(k) (unmatched) and his 403(b) (5 percent match)? I believe the current maximum is $15,000 for me and $20,000 for my husband. We have nominal savings, roughly $15,000 in checking/CDs/savings accounts for an emergency, with easy access; $50,000 in my husband?s current 403(b); and an unknown amount from 25 years worth of pension (if it’s still there at retirement) from his previous employer.
We’re also considering buying one of the countless distressed homes (we are both very handy) or properties available now. Thank you for any guidance. — G.H., via email
DEAR G.H.: I think you’re doing very well on your combined income of $90,000. It is clear that you have lived conservatively. Whether you ought to be buying a new boat is another matter. When you say “new,” you may mean new to you. New boats take a tremendous smack in depreciation the day they come off the assembly line. If you must buy the boat, consider paying for it with some of your savings rather than paying 3 percent plus for a loan. Very likely, your savings are not earning even that little bit.
You should contribute to your retirement plans, but if you have to make a choice, your husband’s is the way to go, since there is a 5 percent match. That’s hard to beat.
If you understand real estate, buying a distressed home, one that can be brought up to speed with relatively minor repairs, is not a bad idea. Once this house has been brought up to speed with regard to maintenance and cosmetic issues, you can reasonably expect its rental income to pay for taxes, maintenance and debt service.
DEAR BRUCE: Back in 2007-08, I was one of several victims of a Ponzi scheme. Unfortunately, none of the victims has been able to recover their money. It was all I had, and it sent me into depression for over a year, trying to figure out my already tight budget from being recently widowed and living off high credit-card debt. Before this, I was able to stay afloat by paying off the credit cards each month as my regular payment, so it appeared I had excellent credit.
When he bolted and stole our money, the Ponzi scheme house of cards collapsed. He is in jail, but they are saying they cannot find the money, which is more than $1 million.
While I was in a depression about it, the attorneys for the major card companies that I owed took me to court. They won the judgment, so one for sure has sued me. Do I have any recourse? I have no business, no job and no money. I am rebuilding my business, but I don’t know what to do in the meantime. — R.B., via email
DEAR R.B.: You’ve told me the various circumstances, but unfortunately, you haven’t nailed it down into dollars. If you are saying there is no opportunity to recover your investments and at least one of the credit-card companies has a judgment against you and you have no assets, it would appear that with no business, no job and no money, a Chapter 7 bankruptcy filing might be an option.
There’s little question that the credit-card obligations can be put behind you if you have a home, which can be protected, and once these things are behind you, you can start to rebuild your life. If you still have outstanding medical bills, these can be overcome with a Chapter 7 filing.
I’m not enthusiastic about bankruptcy, but there are times when it makes sense, and this appears to be one of them.